How to Charge Statutory Interest on Overdue Invoices

Confirm you are in a statutory-interest regime

Before you add a line item, confirm three things: (1) the client is a business or public body in scope, not a consumer; (2) the invoice is actually late under the applicable rules; (3) your contract does not already replace the statutory rate with a different agreed interest rate (especially important in the UK per GOV.UK).

UK path: Late Payment of Commercial Debts (Interest) Act 1998 and GOV.UK late commercial payments guidance — statutory interest generally Bank of England base rate + 8% for B2B. EU path: Directive 2011/7/EU as transposed nationally — statutory interest is the member-state reference rate plus at least eight percentage points; use Your Europe’s tables/calculator for the country whose law applies.

If either path is unclear (cross-border MSA, odd governing-law clause, disputed deliverable), pause the interest invoice and get advice. Charging interest on a disputed principal can escalate conflict faster than chasing the principal alone.

• +8% over base — UK statutory add-on (GOV.UK)
• Ref + ≥8 pp — EU statutory floor (Directive 2011/7/EU)
• Simple, daily — Interest type (EU directive design) (Directive 2011/7/EU recital on daily simple interest)

Gather the inputs, then calculate simply

Inputs you need: invoice total (UK OSBC guidance: include VAT in the total you use), contractual or default due date, first day interest runs, last day you are claiming through, and the applicable annual statutory rate. UK GOV.UK method: annual interest = principal × statutory rate; daily = annual / 365; multiply by days overdue.

EU/Your Europe: interest generally from the day after the due date (or after the 30-day default rules if no period was fixed). Use the published annual percentage for that member state and period, then pro-rate for days. Prefer the official calculator when available so you are not inventing day-count conventions.

Work a second pair of eyes on large claims: a 1% rate error on a five-figure invoice looks sloppy and weakens your credibility if the client’s AP team checks GOV.UK or Your Europe themselves.

Invoice the interest as its own document

GOV.UK’s UK guidance is explicit: send a new invoice if you add interest. That pattern is also wise in EU practice — keep the principal invoice stable for accounting and payment matching, then raise Interest / Late payment charges as a follow-on document referencing the original.

Payment instructions should match how you usually get paid (Stripe link, bank transfer, etc.). Make it trivial to pay principal + interest together or principal first with interest due on a short fuse. Ambiguous “please settle everything” without numbers invites more delay.

Bookkeeping: map interest and compensation to the correct income/expense categories with your accountant. Tax treatment varies; do not assume interest is invisible because it is “statutory.”

• New invoice — UK GOV.UK presentation tip (GOV.UK charging interest page)
• 2–3 nudges — Typical freelancer pre-interest reminders (Practical collections habit (not a statute))
• Incl. VAT total — OSBC calculator note (OSBC interest calculator guidance)

Timing: when to send the interest invoice

Legal entitlement and relationship strategy are different clocks. Frameworks in the UK and under Directive 2011/7/EU generally do not require a prior reminder before interest can be claimed — but clients who never saw a nudge often experience interest as ambush.

A practical sequence many freelancers use: (1) due-date reminder or polite overdue note; (2) firmer status request with a pay-by date; (3) written notice that statutory interest and fixed compensation will be invoiced from a stated date if unpaid; (4) interest invoice. Adjust speed for amount and client history.

If the client pays principal quickly after notice, some freelancers waive interest once as goodwill while reserving the right next time. Waivers should be explicit and one-off so they do not rewrite your terms by habit.

Systems that make the playbook repeatable

Store your rate source links (GOV.UK, Bank of England, Your Europe) next to your invoice template. Keep a one-page checklist: qualify → calculate → notify → invoice → diary follow-up. Solo freelancers lose money less from “not knowing the Act” and more from never running the checklist.

Automate the early reminders so step (1) and (2) always happen. Soft tools like DueChat are useful here: they keep the thread factual and on time so that when you do charge statutory interest, it looks like process, not spite.

Further reading

• GOV.UK — charging interest on late commercial payments
• Bank of England — base rate
• Your Europe — late payment interest and compensation
• OSBC interest calculator

FAQ

Can I add statutory interest to the original invoice PDF?

UK GOV.UK guidance says to send a new invoice for interest. Keeping principal and interest separate also helps clients’ AP teams and your own bookkeeping.

Do I need a lawyer to charge statutory interest?

Many freelancers issue a straightforward interest invoice using official calculators. For large sums, cross-border complexity, or hostile disputes, get professional advice — this article is not legal advice.

What if the client pays the principal but ignores interest?

Treat unpaid interest like any other unpaid invoice: remind, set a deadline, then decide whether the amount justifies further recovery steps. Sometimes waiving a small interest balance after principal clears is a rational commercial choice.

UK or EU — which rate do I use?

Use the rate under the law that governs the debt and the official guidance for that jurisdiction (GOV.UK / 1998 Act in the UK; national transposition of Directive 2011/7/EU and Your Europe tables in the EU). Do not mix rates.